Lawmakers take positive step with modest tax hike

Bill Knight column for Thursday, Friday or Saturday, July 20, 21 or 22

Like most folks, I’m not crazy about paying more taxes.

But I’m not crazy.

The tax increase that was part of the General Assembly this month stepping back from the financial cliff the state was facing is understandable and tolerable.

Overriding Gov. Bruce Rauner’s veto and enacting Illinois’ first budget in 736 days, the bipartisan vote on a package of measures cuts operational spending $5 billion, cuts state-agency funding 5 percent across the board, cuts spending on pensions by $1.5 billion this year and reforms pensions to include a Tier III hybrid plan blending defined benefit and defined contribution parts, and pays more than half of the state’s $15 billion in unpaid bills. Lawmakers also approved raising the income tax from 3.75 percent to 4.95 percent – a tax rate Rauner previously agreed to. (Incidentally, the $36.1 billion balanced budget is less than Rauner’s $37.3 billion plan suggested in February.)

Some describe the tax increase as a “32-percent hike,” which is technically accurate but misleading. Raising the income-tax rate from 3.75 percent to 4.95 percent is a 32-percent difference using only a percentage difference. Using subtraction instead, it’s a 1.2 percentage point increase. (Who would see a discount moviehouse raising its $3 admission to $6 and consider that a “200-percent hike” without appreciating that it’d still be lower than most theaters’ $9 ticket?)

After all, Illinois’ flat-rate income tax is lower than nearby states, which have graduated income taxes, with higher incomes paying higher percentages. Again, Illinois’ new rate is 4.95; surrounding states’ top rates are 6 (Kentucky and Missouri), 6.61 (Indiana), 7.65 (Wisconsin) and 8.98 (Iowa).

The new tax is bearable. The median (midpoint) income in Illinois is $60,413, according to Census figures. Households earning $60,413 that used to pay 3.75 percent ($2,265.48) will now pay 4.95 percent ($2,990.44) – a difference of $724.96 (and exemptions would reduce that).

In other words, the difference for an individual taxpayer would be less than $2 a day.

The prolonged deadlock was never a give-and-take debate and compromise, but Rauner holding the state hostage for his “turnaround agenda” of unrelated issues built on the backs of regular people: weakening workers compensation, busting unions, betraying pension promises, setting term limits, freezing local property taxes for four years, eliminating some levels of local government, and reforming school funding.

Plus, lawmakers seeking compromise approved some workers comp reform, pension reform and possible consolidation of local governments, but not precisely what Rauner sought. A new school-funding formula passed, too, but Rauner’s pledged to veto it, so it’s languishing as he now holds kids hostage.

None of Rauner’s demands were more important to him than weakening unions like Republican Gov. Scott Walker did in Wisconsin, whether through making unreasonable contract ultimatums or taking union resources by limiting fair-share fees from workers who benefit from union representation but decline to become union members.

The billionaire hedge-fund manager’s first campaign stop in running for governor was in Decatur, where he proposed Right To Work legislation and praised Kentucky’s attempt to enact RTW schemes at local levels in an obvious partisan scheme to dilute Democratic-leaning support. His obsession with the American Federation of State, County and Municipal Employees or other unions that mostly back Democrats neglects two points: Unions cannot donate funds to political campaigns from resources meant for bargaining and enforcing contracts, and corporations and the rich mostly back Republicans. So campaign-finance reform should therefore be the goal, not hamstringing one political party.

Further, Rauner’s long campaign to personalize the dispute as House Speaker Mike Madigan’s fault is just silly. Even former Gov. Jim Edgar, a Republican, has said Madigan “is not the big problem. Even a somewhat incompetent governor has more power than Mike Madigan.”

Meanwhile, however, there’s no funding for schools just weeks before classes are supposed to start, despite an innovative Senate Bill 1 that passed both houses by providing “evidence-based” funding to districts. It’s as close as Illinois has gotten to repairing an unfair approach that short-changes areas with low property values. If Rauner doesn’t sign it (he’s conceded he agrees with 90 percent of the measure) – or if the legislature doesn’t again override his veto – schools face an unfunded future that surely within months will drain reserves that conscientious local school boards have built up over decades.

That’s not tolerable.

That’s just crazy.

[PICTURED: Chris Britt cartoon from Progress Illinois.]